In addition to seniors being left with debt that sometimes requires that they file a bankruptcy, some die before they are able to pay off those debts or discharge them during a bankruptcy proceeding.
In many instances, if you are still indebted when you die, that debt dies with you. If you still owe on a mortgage, credit card or a medical debt, and are the sole signatory for the obligation, your spouse or other heirs are not responsible for that debt.
However, the estate would be responsible for those debts and creditors would likely begin collection proceedings against the estate if they were not paid. If there are insufficient assets in the estate to pay off all of the debts, heirs could find themselves being called by debt collectors. However, heirs have no obligation to satisfy these debts if they are not contractually obligated, as the case with cosigners to a credit card.
In Wisconsin, because it is a community property state, spouses should pay attention to any debts that are incurred for the benefit of the family, as they could be personally responsible for paying those debts.
For instance, a home improvement loan that was used to remodel a family home would most likely be found to be a community debt and the spouse would likely be responsible. These can be complex questions depending on the type of debt and you may need to consult an attorney to obtain an answer.
For heirs, it is important to confirm that they were not cosigners to any of the deceased’s debts, as that is likely to make them solely responsible for paying any outstanding balances.
Source: CNBC.com, “Dying with debt can prove costly … for the survivors,” Ilana Polyak, special to CNBC.com, July 6, 2015